Paycheck Protection Program (PPP) Update – October 16, 2020

PPP Forgiveness Simplification

On October 8th, Treasury and the U.S. Small Business Administration (“SBA”) issued a new interim final rule (“IFR”) on loan forgiveness. (See Rule) The purpose of the IFR was to simplify the forgiveness and loan review processes for PPP loans of $50,000 or less. As a result of this IFR, an alternative Loan Forgiveness Application, SBA Form 3508S (See Form & Instructions) was created for PPP loans with a total loan of $50,000 or less. There is an exception, if borrowers together with their affiliates received loans totaling $2 million or greater the simplified form cannot be used by the borrower.

Borrowers that qualify to use the simplified application are exempted from any reductions in forgiveness based on: Reductions in full- time equivalent (FTE) employees; and Reductions in employee salary or wages.

Borrowers will attest/certify to the accuracy of the reported information and calculations on the simplified form.

The Treasury and SBA believe the new form strikes an appropriate balance between the need for simplification in the forgiveness process with the responsibility to protect the integrity of the program. Of the 5.2 million PPP loans approved by the SBA, approximately 3.57 million were for $50,000 or less.

Deferral Period for PPP Loan Payments

The SBA released guidance on Wednesday, October 7th regarding the deferral period for payments on the principal, interest and fee on all PPP loans, even if the executed promissory note indicates only a six-month deferral. The Paycheck Protection Flexibility Act of 2020, P.L. 116-142, extended the deferral period for loan payments to either (1) the date the SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period.

Some PPP borrowers had recently received notices from lenders that payments on their PPP loans were due. The guidance clarified to the lenders that the deferral period extension automatically applies to all loans, with no requirement from the SBA of a formal modification of the promissory note.

PPP Loan Application Due Date – Not October 31st

The SBA issued guidance on Tuesday, October 13th confirming the PPP loan forgiveness applications are not due on October 31, 2020. The confusion about the October 31st deadline was due to the application forms (3508, 3508EZ, and 3508S) having an expiration date of ‘10/31/2020.” In the SBA Q&A No. 4 in the General Loan Forgiveness FAQs Section, the borrowers may submit a loan forgiveness application any time before the maturity of the loan, which is either two or five years from the loan’s origination depending on the borrower’s agreement. Even if a borrower delays submitting a loan forgiveness application, loan payments are deferred only until 10 months after the last day of the borrower’s loan forgiveness covered period.

For questions, please contact your HM&M advisor.

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